Alan Greenspan, former Federal Reserve chairman and registered Republican, says it's time to let go of large-scale tax cuts for the wealthy.
“If we do not get Simpson Bowles as a fallback,” Greenspan told CNBC, referring to a large-scale deficit reduction program proposed by the co-chairs of President Barack Obama’s fiscal commission, “I stand with allowing the Bush tax cuts to expire. You could do it gradually, whatever. But if we think we have this luxury of waiting for a couple of years with a little stimulus now and then later tightening up. I hope the bond markets are listening.”
Greenspan’s comments come as lawmakers are wrangling over the best way to reduce the nation’s budget deficit. President Barack Obama proposed raising taxes on millionaires as part of a plan of spending cuts and tax increases to reduce the budget deficit. Republican leaders responded by accusing Obama of promoting class warfare.
In addition to the budget deficit, Greenspan said debt crisis unfolding in Europe is also informing the U.S. economy.
“What’s driving the United States at the moment to a very large extent is Europe,” Greenspan told CNBC. “You can’t understand the United States at all, I think, unless you know what’s going on in Europe.”
French and German leaders were split Friday on how best to shore up European banks and prepare for a potential Greek default, according to Reuters. German Chancellor Angela Merkel and French President Nicolas Sarkozy are trying to come to an agreement ahead of a summit Sunday, under U.S. and market pressure over concern that failing to resolve the crisis will hinder a global economic recovery.
Still, even if the Euro zone crisis wasn’t exerting pressure on the recovery, the U.S. economy would still be growing at a slow pace, Greenspan said in the interview. The Labor Department’s announcement that the U.S. barely added enough jobs in September to keep up with population growth renewed concerns about the potential for a strong recovery.
“If we could somehow extract the goings on in Europe, I think we could see what we are seeing,” Greenspan told CNBC. “Namely, a sluggish economy but one that is continuously edging higher.”